Reply #20: The Fed's "balance sheet"

[Tansy_Gold]

I've never taken an economics course, not in high school and not in college. But I do have a 2-year degree in accounting.

A balance sheet, for those lurkers who don't know, presents a snapshot of an entity's financial status. I was going to say "health," but I would rather keep this non-judgmental if I can.

The "balance" part refers to a simple equation: A = L + E, where

A = Assets
L = Liabilities
E = Equity


If you buy a house worth $100,000 with $10,000 cash down and you have a $90,000 mortgage, your balance sheet thus looks like:

$100,000 (the value of the asset) = $90,000 (the liability you still owe) + $10,000 (the equity you have in the house from your down payment)


So could someone explain to me how all these Fed shenanigans affect the Fed's balance sheet? And, conversely, the Treasury's balance sheet? Does the Fed have anything other than printing presses to back up its purchase of. . . . of paper money?

Is all of this just insanity, or am I missing something?


Tansy Gold, who really needs to get with the program